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Former Nortel Execs Free of 9-Year-Old Securities Class Action

A pair of former Nortel Networks Corp. executives are free of a class action begun
in 2009 after a federal judge held that their alleged misstatements aren’t enough
to support a securities law claim.

Nortel’s investors didn’t show Mike Zafirovski and Pavi Binning misled them about
Nortel’s finances, and even if they had, they didn’t show the executives consciously
or recklessly misbehaved, according to a U.S. District Court for the Southern District
of New York
opinion. The court dismissed the case April 11. Zafirovski was formerly the CEO of Canadian
telecommunications equipment firm Nortel, while Binning was its chief financial officer.

The investors said Zafirovski’s statements about Nortel’s quarterly results were misleading
because he didn’t discuss some Nortel customers’ reductions in capital investments,
according to the opinion. However, Zafirovski’s statements, while optimistic, didn’t
require him to discuss specific customers, the court held. Nortel had already said
its fortunes were dependent on customers’ capital investments and the public already
knew some investments had been cut back, the court said.

The investors also said statements about Nortel’s goodwill in its quarterly financial
reports — which Binning signed — were false, the opinion said. However, goodwill estimates
are opinions, not objective facts, and the investors didn’t sufficiently allege Binning
didn’t believe the statements, the court held.

Even if the investors had shown Zafirovski and Binning misled them, they didn’t show
the executives did so consciously or recklessly, the court held. The investors didn’t
make any plausible allegations that Zafirovski or Binning intentionally deceived them,
according to the opinion.

Senior District Judge Denise Cote, who presided over the case, has heard 127 securities
cases since 2007, according to Bloomberg Law Litigation Analytics. Of those, 13 have
been appealed, with the U.S. Court of Appeals for the Second Circuit affirming Cote
76.9 percent of the time.

Attorneys with Robbins Geller Rudman & Dowd LLP’s Melville, N.Y., office represented
the class. Attorneys with Morrison Foerster LLP’s New York office represented Zafirovski
and Binning. The parties’ attorneys didn’t immediately respond to a request for comment
on the decision.

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